The U.S. economy is at or near a cyclical peak and could easily tip over into recession, according to a new blog by the University of Hawaiʻi Economic Research Organization (UHERO) released on September 6. Tariff hikes, federal layoffs, cuts (or threatened cuts) to large projects that are in part federally funded (such as renewable energy projects), and generalized policy and legal uncertainty will likely play important roles, according to blog author and UHERO Professor Emeritus Byron Gangnes.
What is a recession?
While the economy is clearly slowing, to be considered a recession, it must actually contract. Ganges said a common, simple rule of thumb for determining a recession is: two consecutive quarters of negative real GDP growth. Recessions matter because they signal lower employment, higher unemployment, reduced incomes, lower corporate profits, and other adverse economic effects on households and the companies they work for.
That was then, this is now
A year ago, nearly all the indicators tracked by the National Bureau of Economic Research (NBER) were rising, with little sign of slowing, let alone decline. In part, this reflected continuing robust consumer spending that was driving overall growth. But since the start of this year, U.S. economic growth has slowed.
Across several NBER measures, activity has been roughly unchanged since March. In some cases, the indicators were already weak in 2024 (payroll jobs and personal income). One bounced up at the start of the year, but has since stalled (industrial production). Consumer spending has posted one of the weakest first-halves on record, after steady growth in 2024.
The most troubling trend?
One indicator that is particularly worrisome, according to the blog, is employment measured by the household survey. The number of people reporting that they are employed has declined by 575,000 since April, even after an uptick in August. In part, this reflects an end to growth in the labor force itself. If sustained, a flat or declining labor force will also constrain the growth of companies’ payrolls, which have slowed to near zero in recent months.
Read the entire blog on the UHERO website.
UHERO is housed in UH Mānoa’s College of Social Sciences.
